Transcript CIGNA CORPORATION

CIGNA Corporation
UBS Global Healthcare Services
Conference
Jon Rubin
February 12, 2008
All Rights Reserved. These materials may not be reproduced, in whole or in part, without the
express written permission of the owner, CIGNA.
FORWARD LOOKING STATEMENTS
CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
CIGNA and its representatives may from time to time make written and oral forward-looking statements, including statements contained in press releases, in CIGNA’s filings with the
Securities and Exchange Commission, in its reports to shareholders and in meetings with analysts and investors. Forward-looking statements may contain information about financial
prospects, economic conditions, trends and other uncertainties. These forward-looking statements are based on management’s beliefs and assumptions and on information available to
management at the time the statements are or were made. Forward-looking statements include but are not limited to the information concerning possible or assumed future business
strategies, financing plans, competitive position, potential growth opportunities, potential operating performance improvements, trends, and, in particular, CIGNA’s productivity
initiatives, litigation and other legal matters, operational improvement in the health care operations, and the outlook for CIGNA’s full year 2007 and 2008 results. Forward-looking
statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe”, “expect”, “plan”, “intend”,
“anticipate”, “estimate”, “predict”, “potential”, “may”, “should” or similar expressions.
You should not place undue reliance on these forward-looking statements. CIGNA cautions that actual results could differ materially from those that management expects, depending on
the outcome of certain factors. Some factors that could cause actual results to differ materially from the forward-looking statements include:
1.increased medical costs that are higher than anticipated in establishing premium rates in CIGNA’s health care operations, including increased use and costs of medical
services; 2.increased medical, administrative, technology or other costs resulting from new legislative and regulatory requirements imposed on CIGNA’s employee benefits
businesses; 3.challenges and risks associated with implementing operational improvement initiatives and strategic actions in the health care operations, including those related to: (i)
offering products that meet emerging market needs, (ii) strengthening underwriting and pricing effectiveness, (iii) strengthening medical cost and medical membership results, (iv)
delivering quality member and provider service using effective technology solutions, and (v) lowering administrative costs; 4.risks associated with pending and potential state and federal
class action lawsuits, purported securities class action lawsuits, disputes regarding reinsurance arrangements, other litigation and regulatory actions challenging CIGNA’s businesses and
the outcome of pending government proceedings and federal tax audits; 5.heightened competition, particularly price competition, which could reduce product margins and constrain
growth in CIGNA’s businesses, primarily the health care business; 6.significant changes in interest rates; 7.downgrades in the financial strength ratings of CIGNA’s insurance
subsidiaries, which could, among other things, adversely affect new sales and retention of current business; 8.limitations on the ability of CIGNA’s insurance subsidiaries to dividend
capital to the parent company as a result of downgrades in the subsidiaries’ financial strength ratings, changes in statutory reserve or capital requirements or other financial
constraints; 9.inability of the program adopted by CIGNA to substantially reduce equity market risks for reinsurance contracts that guarantee minimum death benefits under certain
variable annuities (including possible market difficulties in entering into appropriate futures contracts and in matching such contracts to the underlying equity risk); 10...adjustments to the
reserve assumptions (including lapse, partial surrender, mortality, interest rates and volatility) used in estimating CIGNA’s liabilities for reinsurance contracts covering guaranteed
minimum death benefits under certain variable annuities; 11.adjustments to the assumptions (including annuity election rates and reinsurance recoverables) used in estimating CIGNA’s
assets and liabilities for reinsurance contracts that guarantee minimum income benefits under certain variable annuities; 12.significant stock market declines, which could, among other
things, result in increased pension expenses of CIGNA’s pension plan in future periods and the recognition of additional pension obligations; 13.unfavorable claims experience related to
workers’ compensation and personal accident exposures of the run-off reinsurance business, including losses attributable to the inability to recover claims from
retrocessionaires; 14.significant deterioration in economic conditions, which could have an adverse effect on CIGNA’s operations and investments; 15.changes in public policy and in the
political environment, which could affect state and federal law, including legislative and regulatory proposals related to health care issues, which could increase cost and affect the market
for CIGNA’s health care products and services; and amendments to income tax laws, which could affect the taxation of employer provided benefits, and pension legislation, which could
increase pension cost; 16.potential public health epidemics and bio-terrorist activity, which could, among other things, cause CIGNA’s covered medical and disability expenses, pharmacy
costs and mortality experience to rise significantly, and cause operational disruption, depending on the severity of the event and number of individuals affected; 17.risks associated with
security or interruption of information systems, which could, among other things, cause operational disruption;18.challenges and risks associated with the successful management of
CIGNA’s outsourcing projects or key vendors, including the agreement with IBM for provision of technology infrastructure and related services;19.the ability of the parties to satisfy
conditions to the closing of the Great-West transaction, including obtaining required regulatory approvals;20.the ability to successfully integrate and operate the businesses being acquired
from Great-West by, among other things, renewing insurance and administrative services contracts on competitive terms, retaining and growing membership, realizing revenue, expense
and other synergies, successfully leveraging the information technology platform of the acquired businesses, and retaining key personnel;21.the ability of CIGNA to execute its growth
plans by successfully leveraging its capabilities and those of the business being acquired from Great-West to further enhance the combined organization’s network access position,
underwriting effectiveness, delivery of quality member and provider service, and increased penetration of its membership base with differentiated product offerings; and22.any adverse
effect to CIGNA's business or the business being acquired from Great-West due to uncertainty relating to the acquisition transactions.
This list of important factors is not intended to be exhaustive. Other sections of CIGNA’s most recent Annual Report on Form 10-K, including the “Risk Factors” section, the Cautionary
Statement in Management’s Discussion and Analysis of Financial Condition and Results of Operations, CIGNA's Forms 10-Q for the quarters ended March 31, 2007, June 30, 2007, and
September 30, 2007, and other documents filed with the Securities and Exchange Commission include both expanded discussion of these factors and additional risk factors and
uncertainties that could preclude CIGNA from realizing the forward-looking statements. CIGNA does not assume any obligation to update any forward-looking statements, whether as a
result of new information, future events or otherwise, except as required by law.
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Agenda

CIGNA Overview

2007 Results

HealthCare’s competitive strengths

HealthCare growth strategy

2008 Outlook

Acquisition of Great-West HealthCare Business

Long-Term outlook

Investor Considerations
Financial information is provided as of February 12, 2008 only. CIGNA does not undertake to revise or update this information.
3
Our Mission
CIGNA - Overview
Health Service Company - maximizing the engagement of
each person we serve to improve their health, well being and
security.
Community
Lower
Costs
Improve
Health
Quality of Life
Consumer
Employer
Provider
Engagement
Activity
Happiness
Consumer
Productivity
Fundamental Tenets
Health care system
We will improve the quality of life within the communities
we serve, live and work.
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CIGNA Overview

HealthCare business with strong competitive position

Industry leading health advocacy and clinical mgmt
capabilities

Award winning consumer engagement capabilities

Broad range of specialty and disease mgmt capabilities

Integrated solutions

Leading Group Insurance and International businesses

Strong cash flow generation
5
2007 Results

Medical membership growth of 8%



Includes organic membership growth of ~ 5%
EPS¹ growth of 26%

Strong earnings contribution from all ongoing businesses

Repurchased shares - $1.16B
Financial position continues to remain strong

Well-capitalized operating subsidiaries
¹ Reflects adjusted income from operations, which is income from continuing operations excluding realized investment results
and special items. See CIGNA’s February 6, 2008 press release for a reconciliation of this non-GAAP measure to GAAP
measures of income from continuing operations and net income.
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Investment Portfolio – December 31, 2007

Strong underwriting discipline – focus on high quality
investments

Total portfolio is $17.5B



Diversified portfolio – corporate & government bonds, private
placements, and commercial mortgages
No Subprime exposure
Mortgage loans of $3.3B

All related to commercial loans, no residential mortgages

All loans are fully performing, LTV ratio ~62%

Loans are diversified by property type / location / borrower
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Environmental
Impact
on Health
Environmental
Impact on
Health
doctors
school
children
workplace
 Health
Advocacy
labs
INDIVIDUAL
 Coaching
 Decision
Support
grocery
store
parents
neighborhood
hospitals
 Predictive
Modeling
 Gaps in
Care
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Advocacy
the Disease
Spectrum
Advocacy Across
theAcross
Disease
Spectrum
17% of
Population
Acute
48% Cost
18% of
Population
HEALTH CARE EXPENSES
35% Cost
Chronic
22% of
Population
At-Risk
10% Cost
43% of
Population
7% Cost
Healthy
AGE & RISK FACTORS
9
Our Exclusive Health Risk Model

Earlier and
More Effective
Risk
Identification


Comprehensive suite of predictive tools to identify
and assess risk real-time
Forecast the individual’s risk to be a high utilizer of health
care services with 83% accuracy
Only company with University of Michigan’s Health
Assessment and Trend Management System
Annual Patient Cost
$ 9,000
High Risk
8,000
Earliest
interventions
help prevent
medical events
7,000
6,000
5,000
Medium Risk
Case
Management
Low Risk
Disease Disease
Management
Management
Traditional medical
management reacts to
disease/illness
Utilization
Management
4,000
3,000
2,000
1,000
0
Q12
Q10
Q8
Q6
Q4
Q2
Q0
Q2
Q4
Q6
Q8
Q10
Q12
Original chart source: Musich,Schultz,Burton,Edington. DM&HO. 12(5):299-326, 2004
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2007 National HEDIS Results: CIGNA vs.
Competitors
CIGNA’s performance exceeds national competitors in the majority of the 22 HEDIS
measures that NCQA includes in its Health Plan Accreditation program
22
Number of HEDIS Measures
20
18
20
16
20
14
12
16
15
10
12
8
10
6
4
7
6
2
2
0
CIGNA Aetna
CIGNA
Anthem/ CIGNA
WellPoint
Humana
2
CIGNA
United
CIGNA
Healthcare
Quality
Compass
Results based on the following number of health plans reporting
CIGNA - 23 plans
Aetna - 21 plans
Anthem/WellPoint 14 plans
Humana - 13 plans
United Healthcare - 40 plans
Source: 2007 HEDIS, a registered trademark of the National Committee for Quality Assurance (NCQA).
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A Holistic, Integrated
Approach
to Health
A Holistic, Integrated
Approach
to Health
 Single case
management
 Shorter
duration
 Improved
medication
adherence
Disability
Pharmacy
 Faster return to
work
 Cost transparency
 Better predictive
modeling
 Higher generic
dispensing
Medical
 Integrated data
 More effective
advocacy and
coaching
 Reduced
hospitalizations
 High risk maternity
management
Behavioral
Dental
 Chronic disease
management
 Evidence-based
design incentives
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Real Results — Cumulative Cost Savings
Integrated Programs Drive Greatest Savings

CIGNA Solutions
Traditional Medical Management


Intensive Medical Management

Disease or Condition Mgmt.


Health Coach
Mandatory Health Assessment

Integrated Products
13
Multi-year HealthCare Growth Strategy

Grow existing commercial employer membership


Take share from first and second tier competitors
Segment expansion

Voluntary

Individual

Small group (<200)

Seniors (both 50 to 64 and Medicare eligible 65+)

Continued productivity improvements

Specialty penetration
14
2008 Outlook

Grow full-year Healthcare membership by 2% to 5%

Increased membership by ~ 2% as of January 1, 2008

Continue to deliver competitively superior results in
Group Insurance and International businesses

Earnings Outlook

Full year consolidated income²: $1.165B – 1.225B

EPS²: $4.05 - $4.25

Health Care income²: $740M - $780M
² Based on adjusted income from operations, which is income from continuing operations excluding realized investment, Guaranteed
Minimum Business Income Benefit business results and special items.
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Great-West HealthCare Acquisition - Overview

Acquiring 2.2 million covered lives

Increases medical membership by ~1.5 million

Accelerates growth in small group segment

Differentiated product capability

Accretive in 2009 and significantly accretive in 2010+

Improve medical costs near term and realize expense
synergies over time
16
Great-West HealthCare Acquisition – Earnings
Estimate
($ Millions)
2009
Estimated operating income
$200 - $230
Financing / Intangible amortization /
Transition expenses
($65) - (55)
2009 net contribution
$135 - 175
2010 net contribution
$200 - 250
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Longer-Term Expectations³
 Target
annual operating income growth in ongoing
businesses – 9% to 10%
 Capital
 Target
management contribution – 3% to 5%
compound annual EPS growth – 12% to 15%
³ 3 to 5 year outlook
18
Investor Considerations

HealthCare growth outlook

Anticipated additional share gains

Specialty penetration

Profit margin expansion

Significant concentration in fee-based products

Diversified earnings stream


HealthCare, Group Insurance, International
Strong cash flow generation
19
20